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By definition, personal finance means managing, investing, and saving money. Setting realistic goals and making smarter decisions with your money are also part of managing your personal finances. Retirement savings aren’t the only financial goals you can set. Saving for your kids’ college education, a vacation, or having cash to rely on in an emergency are all possible goals.
Being financially savvy and planning ahead can help manage your debt, boost your cash flow and increase your savings. To help you maintain a healthy financial standing, we’ve put together a list of practical tips to reach your financial goals.
The first step is to establish a budget. When you create a list of your income and expenses, you can see which expenses are fixed, where you are wasting money, and how you can save. For the best personal finance tips and ways to boost your wallet growth, you can find out more by reading on.
Create a list of monthly expenses and separate them into fixed, debt, and unnecessary expenses. Fixed expenses include any type of insurance, monthly groceries and fuel costs. Your debt expenses include loan payments, credit card debt, and mortgage repayments.
Unnecessary expenses include multiple streaming services, delivery memberships, and similar costs that you can reduce by choosing the best streaming service or membership subscriptions. Tracking and documenting your expenses gives you a clearer understanding of your spending habits.
The funds you have left after your expenses will be the amount you will use to save and spend. For example, the 50/15/5 budgeting model suggests distributing 50 percent of your income to expenses, 15 percent to retirement savings, and 5 percent to an emergency fund. The 30 percent difference can be spent on your wants and needs
Adjusting your budget as things change to ensure it works for you and your lifestyle is essential. Spending less or changing your savings goals may be necessary if your expenses are increasing, or your savings might increase if you get a pay raise or pay off some debt. Adjust your budget accordingly depending on the financial goals you set or when your circumstances change.
Personal financing begins with an established budget and setting realistic goals. These realistic goals should be manageable and easy to achieve. Having a goal requires a plan that can be broken down into three categories.
Your income, expenses, and other financial commitments will determine how long you take to achieve your goals. Consistency is key to achieving your financial goals.
Sixty-seven percent of millennials polled by NBC News/GenForward said they would have trouble paying a thousand dollars in an emergency. An emergency fund acts as a safety net in times of crisis, saving you from personal expenses.
Your emergency fund should be kept in a separate bank account that is accessible at all times. You can use these funds for emergencies, including medical costs or unexpected plumbing/car issues, or to carry you through a period of unemployment.
The amount you save will depend on your financial situation, this amount will be from 5 to 10% of your income. Save money in an accessible, high-interest savings account.
Managing your debt involves limiting your spending habits. Borrowing too much can keep you from getting out of the debt cycle. Getting your debt sorted out is important if you’re feeling overwhelmed.
Identify the most expensive debts. Choose the debt with the highest interest rates and costs, as some debts are more expensive than others. Avoid skipping payments or paying off your store cards too late. Consider consolidating your debt to lift the burden and try and close as many store cards as possible.
The key to avoiding debt traps for millennials is financial planning. Taking control of your personal finances includes creating a budget and being consistent. Not only do you take charge of your day-to-day financial needs, but you are also planning and taking the steps to secure your financial future.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.